Last year, Nintendo announced that the Switch 2 would have a Japan-Only Switch 2 console released at a lower price point but also region-locked so it could only play Japanese game cards.

This less expensive version of the Switch 2 is believed to be Nintendo’s strategy to make the console more affordable in Japan, which is suffering from a weak currency and inflation. While this move has indeed ensured that many Japanese players have been able to afford the console, it is almost certainly eating into the company’s profits.

According to Toyo Securities analyst Hideki Yasuda, Nintendo’s recently reported profit margins are lagging despite the strong sales of the Switch 2. He attributes this mismatch to the Japan-only Switch 2, which he estimates is costing Nintendo $160 USD for every unit sold. He arrived at this figure by analyzing Nintendo’s production costs, estimating that the Switch 2 costs around $400 USD to produce but is being sold at $330 USD in Japan.

Yasuda also says that this “negative margin” means that Nintendo will continue to see “profitability deteriorating further with every console sold.” unless something is done. He believes that Nintendo ought to raise the price of the console at some point, or to release “custom design models” in order to improve the Switch 2’s profitability.

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